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Why the Prolonged Fall in EUR/CHF May Not Yet Be Over

Why the Prolonged Fall in EUR/CHF May Not Yet Be Over

2020-02-26 16:00:00
Martin Essex, MSTA, Analyst
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EUR/CHF price analysis:

  • EUR/CHF has been falling within a well-defined downward-sloping channel on the charts since the middle of December last year.
  • It is now back to levels last seen in the Summer of 2015, a few months after the ‘flash crash’.
  • Moreover, there are few signs yet that the trend lower is over, and the 1.05 level is now a reasonable downside target.

EUR/CHF Outlook: Further downside possible

Losses in the EUR/CHF cross over the past 11 weeks have been dramatic, with the price dropping from above 1.10 to only just above 1.06. Over the last two weeks it has stabilized but that may well prove to have been just a pause for breath before a further decline.

As the chart below shows, the pair is trading within a well-defined downward-sloping channel and this week hit its lowest level since July 2015, six months after the Swiss Franc’s so-called “flash crash”. Now it is close to the channel’s resistance line and a drop back to the middle of the channel around 1.0550 is possible.

A further fall to channel support – currently at 1.05 – would then be on the cards, with the “round number” an attractive target.

EUR/CHF Price Chart, Daily Timeframe (December 3, 2019 – February 26, 2020)

Latest EUR/CHF price chart

Chart by IG (You can click on it for a larger image)

Note that the RSI at the bottom of the chart is back above 30 so, after the recent pause for breath, is no longer in oversold territory. Moreover, if the price were to break above the channel resistance line it would still need to break above the 20-day moving average 1.0647 and the 50-day moving average at 1.0717 to make further progress.

EUR/CHF MIXED
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 21% 6% 13%
Weekly -1% 14% 6%
What does it mean for price action?
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Technicals aside, note too that the Swiss Franc is benefiting as a safe haven from the risk-off mood in the markets caused by the spread of the coronavirus. At the same time, speculation is growing that the European Central Bank may cut interest rates this year to offset economic weakness in the Eurozone. The overnight index swaps market currently suggests a 94% chance of a 10 basis points rate reduction by year-end.

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--- Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below

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